The COVID pandemic’s lasting impact on cloud usage

9 out of 10 companies have accelerated their cloud adoption in response to the coronavirus pandemic, with corresponding increases in cloud spend—and waste.

The COVID pandemic’s lasting impact on cloud usage
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Public cloud adoption was on the rise well before the COVID-19 pandemic hit in early 2020. The coronavirus proved to be a powerful driver of rapid digital transformation, across industries, outpacing previous expectations or goals.

COVID-19 has pushed cloud usage slightly or significantly higher than initially planned for the vast majority of organizations (9 out of 10), according to the Flexera 2021 State of the Cloud Report. The report, based on a survey of 750 global respondents, is the 10th annual look at trends related to cloud adoption, usage, and challenges.

The results of the 2021 report no doubt reflect the additional capacity consumed by existing cloud-based applications as online usage grew, as well as the accelerated migration from data centers to cloud in response to pandemic-driven changes to work environments. At the same time, more organizations have embraced the public cloud as a more reliable resource for business continuity.

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The rise of cloud usage

In 2021, nearly all organizations (99%) use at least one public or private cloud, with AWS, Azure, and Google remaining the top three public cloud providers. Currently 50% of workloads and 46% of data are in public clouds, with those numbers set to grow by 7% and 8%, respectively, in the coming 12 months.

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On average, organizations use 2.6 public and 2.7 private clouds, while also experimenting with an additional 1.1 public and 2.2 private clouds. Hybrid cloud (using both public and private cloud) approaches dominate, with 78% of respondents taking a hybrid approach. 

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To manage their cloud and cloud-first strategies, many organizations have a central cloud team or a cloud center of excellence (CoE). These teams are tasked with delivering best practices and centralized controls to reduce costs while accelerating cloud adoption. Presently 39% of organizations have a central cloud team, 36% have a cloud CoE, and an additional 17% are planning to move toward this centralized approach.

Growing cloud spend

As the use of public cloud grows, so does cloud spend. Public cloud is an increasingly significant line item in IT budgets. Findings from this year’s research show that the number of organizations spending at least $12 million annually ($1 million per month) nearly doubled over last year’s findings (31% in 2021; 16% in 2020). This year, more than three out of four (76%) spend $1.2 million or more annually ($100,000 per month) on public cloud.

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As organizations rapidly scale up their cloud initiatives, accurate forecasting of cloud costs often proves to be challenging, as evidenced by public cloud spend being over budget by an average of 24%. Budgetary challenges aren’t likely to ease in the coming year, when respondents expect that cloud spend will increase by an additional 39%.

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At the same time, wasted cloud spend continues to be a significant concern. Respondents to the Flexera 2020 State of the Cloud Report estimated that their organizations wasted 30% percent of cloud spend; that number remained the same in the 2021 report—indicating not only that waste is significant, but that the problem isn’t easing, year-over-year. Improved forecasting and cloud cost optimization will take on new significance as cloud usage continues to grow.

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Perhaps it’s no surprise, then, that the cost-control measure of optimizing existing use of cloud is the top cloud initiative—for the fifth year in a row. Other top initiatives also address ways to improve the bottom line. Migrating workloads to the cloud can reduce expenses and the technical debt that comes with maintaining traditional data centers. Improved financial reporting on cloud costs and across an entire hybrid IT estate, such as through IT asset management or technology value optimization (TVO) initiatives, can provide internal stakeholders with improved reporting that can help drive budgeting and resource planning. Similarly, using multicloud management, cost management, security, and governance tools, along with automated policies (such as shutting down workloads after hours and rightsizing instances) can help eliminate waste.

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Part of the challenge in managing cloud spend comes from the complex jobs of deciphering cloud provider pricing structures. Most organizations aren’t maximizing the discounts available from cloud providers, which offer savings opportunities (e.g., for reserved instances or committed use) that merit a closer look by the organizations that rely on these clouds.

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The challenges of cloud migration

Today’s complex, rapidly evolving IT environments present many challenges when migrating to the cloud. Among those challenges, mapping relationships—across apps, hardware, and networking devices for each IT-delivered service—rises to the top. Understanding app dependencies is the top migration challenge for more than half (51%) of organizations. Close behind: assessing technical feasibility, assessing on-prem vs. cloud costs, rightsizing instances, and understanding the implications of bring your own license (BYOL) terms.

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Organizations of all maturity levels cite security as one of their top challenges. Organizations at the beginner and intermediate levels of cloud maturity are burdened also by a lack of resources and expertise. For organizations that have reached the level of advanced cloud maturity, managing cloud spend becomes increasingly difficult. As cloud usage continues to grow and even as organizations mature in their cloud initiatives, cloud cost optimization will continue to remain an important step for harnessing investments and focusing on innovation and resilience.

For additional findings, including how enterprise cloud usage compares to that of small-to-midsized businesses (SMBs), please download the Flexera 2021 State of the Cloud Report.

Kevin Miller is the senior product manager at Flexera.

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